WASHINGTON - World Bank President Paul Wolfowitz's anti-corruption crusade could jeopardise those it claims to protect, the poor in developing nations, by letting powerful players off the hook and by not extending corruption probes to the Bank's past lending, a leading U.S. whistleblower group says.
The Washington-based Government Accountability Project (GAP) says the World Bank's Voluntary Disclosure Program (VDP), which was approved in August as the first part of its much-touted anti-graft drive, is too lenient and places no sanctions on corrupt corporations.
Under the VDA, corporations or individuals that confidentially admit past wrongdoing can avoid being barred from World Bank loans and avoid public exposure. Instead, they can expect a three-year classified monitoring programme and a probe designed and funded in part by the companies themselves.
During this week's joint annual meetings of the World Bank and the International Monetary Fund in Singapore, Wolfowitz managed to get the Development Committee, the highest policy-making body of both institutions, to approve the second phase of his strategy paper on strengthening its engagement in governance and anti-corruption.
The paper allows the Bank, whose core mission is to fight global poverty, to suspend entire loans even if they finance social programmes that directly benefit the poor.
The steps alarmed watchdog groups who say they want the Bank to fight corruption, and even freeze loans sometimes, but on grounds that do not end up denying the poor the social services they need.
"The combination of the two things means that it is possible that the actions the Bank will take to address corruption will affect the poor and the innocent more than they will the few and the guilty," Bea Edwards, GAP's international programme director, told IPS.
In its critique of the Bank's strategy on Friday, the group said that the public lender has missed real targets in the fight against corruption by turning a blind eye to its own policies, such as extending loans to corrupt regimes in the past while not exercising enough oversight.
"The World Bank has created or certainly has been a party to a debt crisis in many countries," Edwards said. "The money wasn't carefully monitored. It wasn't judiciously spent and now the public in those countries, many of them poor countries, are repaying those resources even though the public did not benefit from borrowing the money or from contracting those loans."
Critics also fault the Bank for promoting measures such as deregulation, decentralisation, privatisation of major public assets and less oversight in poor nations under the argument of fighting red tape and promoting a friendlier environment for private investment.
The result has been corruption involving Bank money. Many World Bank internal documents do acknowledge that some Bank projects have been marred by bribery, extortion and other unethical practices.
According to a 2004 study by a U.S. Senate committee, the World Bank has lost about 100 billion dollars slated for development in the world's poorest nations to corruption since 1946 -- nearly 20 percent of its total lending portfolio.
Other experts estimate that between five and 25 percent of the 525 billion dollars the Bank has lent since 1946 has been misused. This amounts to 26 billion to 130 billion dollars.
The new strategy repeats the "red tape" argument, GAP says.
"Consistently in their anti-corruption strategy they refer to state regulations as red tape. It is true that are some regulations that are purely bureaucratic red tape. But there are many regulations that the governments have placed that actually do serve a purpose in monitoring expenditure of resources," Edwards told IPS.
But ever since coming to office in 2005, Wolfowitz has made fighting corruption a flagship of his tenure. He has cut back funding for projects in Argentina, India and Kenya because of alleged corruption.
On a recent trip to Indonesia, he announced a "long-term strategy" for using the Bank's funds and expertise to help developing countries rid their governments of bribe-taking and other dishonest practices. A key component will be the deployment of anti-corruption teams in many World Bank country offices.
Wolfowitz also has plans to restructure the Bank's Department of Institutional Integrity, a watchdog, to make its authority clearer and its operations more effective.
Earlier this year, he led efforts to gather heads of other multilateral lenders such as the Inter-American Bank and the African Development Bank to commit verbally to further combating corruption.
None of these gestures have allayed fears among watchdog groups that the Bank's plan is inadequate.
Civil society groups now point to the need for the Bank to model its strategy on the U.N. Convention against Corruption, which has won praise for its emphasis on the recovery of assets already stolen.
The convention cites restitution as pivotal to fighting corruption and recognises that millions of citizens are poor because their national wealth and resources have been plundered. Wolfowitz' plan has no similar elements.
© 2006 IPS - Inter Press Service